Oil Markets on Edge: Geopolitics, Gluts, and Bearish Signals Collide

The oil market continues to navigate a complex web of geopolitical risk, shifting supply dynamics, and weakening demand signals. With OPEC+ set to decide on another potential output hike, trade tensions simmering across major economies, and U.S.-Iran nuclear talks stalling, sentiment remains fragile. Meanwhile, Canadian drilling activity shows signs of cooling, US crude inventories are rising amid softening product demand, and Chevron’s limited license in Venezuela underscores tightening US policy. Technically, crude prices remain under pressure, reinforcing a bearish market tone as traders weigh the road ahead.

Oil Slips as OPEC+ Eyes Output Hike

Oil prices dipped slightly on Tuesday as markets considered the possibility of OPEC+ raising crude output at its upcoming meeting, now scheduled for May 31. Brent crude fell to $63.60 a barrel, while WTI slipped to $60.77. The group is expected to confirm a 411,000 bpd production increase for July. Losses were tempered by news that U.S.-EU trade talks were extended, easing fears of fuel demand pressure. Meanwhile, Iran raised its June crude price for Asia and indicated resilience even if nuclear talks with the US falter—potentially keeping sanctions and supply constraints in place.

Trade Wars Cool Alberta Oil Rush

According to Bloomberg, oil drilling land sales in Alberta are cooling off as crude prices hit four-year lows, driven by global trade tensions and OPEC+ output hikes. Average lease prices for oil sands land have dropped 18% this year, signaling a slowdown after last year’s boom from the Trans Mountain pipeline expansion. Despite the downturn, long-term growth is expected, with oil sands production projected to rise by 500,000 barrels a day by 2030. The Montney formation, especially the Elmworth field, remains a hot spot for drilling due to its rich oil and gas reserves, drawing record bids even as broader market sentiment weakens.

Iran Talks Stall, Tariff Tensions Linger as Oil Market Stays Uneasy

Oil traded quietly ahead of the Memorial Day holiday as U.S.-Iran nuclear talks showed only limited progress, raising the risk of continued sanctions on Iranian supply. Strong US economic data helped offset market jitters from ongoing trade tensions, including President Trump’s threat of steep EU tariffs. Despite recent volatility, sentiment remains bearish amid concerns about a potential OPEC+ supply hike, persistent US stockpile builds, and a global oversupply outlook. Geopolitical tensions and uncertain diplomacy continue to cloud the market’s direction.

US Crude Stocks Rise as Fuel Demand Sputters

US crude inventories rose by 1.3 million barrels last week, though stockpiles remain 6% below the five-year average. Refineries ran at 90.7% capacity, with gasoline and distillate production both up. Imports climbed to 6.1 million barrels per day but are still down 13.5% from last year’s levels. Total petroleum inventories increased by 4.9 million barrels. Product demand softened, with total products supplied down 2.8% year-over-year, including a 4.2% drop in distillate demand. Jet fuel was the exception, up 4% from the same period last year.

Chevron Gets Slimmed-Down License for Venezuela Ops

The Trump administration plans to grant Chevron a narrowly focused license to perform only essential maintenance and safety-related work in Venezuela, as its broader operations license expires on May 27. This limited waiver echoes restrictions last seen in 2022 and prohibits new investments or crude exports. The move marks a rollback of Biden-era concessions and reflects a harder US stance toward President Nicolás Maduro. While the license allows Chevron to retain a minimal presence, its issuance could keep diplomatic channels open amid ongoing political tensions.

Technical Analysis: Oil Under Pressure

Crude oil remains firmly entrenched in a bearish trend since its January 15 peak at $79.30, with both price structure and technical indicators reinforcing sustained downside momentum. The initial reversal was signaled by a Bearish Harami, followed by a breakdown below the 20- and 50-period EMAs—an early trigger for increased selling activity.

A subsequent failure swing at $76.96, unable to breach the prior high, confirmed bearish control. The formation of a “Death Cross” (20-EMA crossing below the 50-EMA) further validated the downtrend. Momentum indicators continue to signal weakness: the Momentum Oscillator remains below the 100 line, and RSI is firmly under 50, suggesting persistent selling pressure.

If bearish momentum holds, key support levels to watch are $57.57, $54.67, and $47.25. A potential reversal would require a break of resistance at $66.46, with further upside targets at $68.16 and $75.06.

Conclusion

The current oil landscape reflects a market under strain, caught between rising geopolitical uncertainty, softening global demand, and the potential for increased supply. From OPEC+ production decisions and stalled U.S.-Iran nuclear talks to cooling Canadian drilling activity and growing US inventories, bearish sentiment continues to dominate. While select regions like Elmworth offer pockets of optimism, technical indicators suggest downside risks remain in play. Until market fundamentals realign or geopolitical tensions ease, oil prices may remain under pressure with limited near-term upside.